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Small variances in federal regulations may give bank examiners wide discretion in deciding how they will enforce U.S. customer due-diligence requirements set to take effect in May.

The long-anticipated CDD rule, which the U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, finalized in 2016, will require banks to take reasonable steps to identify individuals owning at least 25 percent of any legal entity for whom they hold accounts, and one person who exercises significant control over the firm in question.

Senior officials with the Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. have sought to allay the financial services industry’s concerns over the new rule, disclosing tentative plans to refrain, at least initially, from levying heavy penalties against banks that make genuine efforts to comply but still fall short.

Contrasting sets of federal regulations appear likely to aid examiners in following through on those pronouncements.

Title 31, which transposes the Bank Secrecy Act and other laws into regulation, outlines the “four pillars” of an anti-money laundering program, but was updated shortly after the CDD rule’s finalization to incorporate a “fifth” pillar of compliance: appropriate risk-based procedures for ongoing customer due diligence.

But banking regulators conduct their AML reviews under Title 12, which, along with the federal examination manual, still lists only the first four pillars mandated by the Money Laundering Control Act of 1986.

So examiners will instead cite violations of the CDD rule as infractions of the internal-controls requirement or one of the other original three pillars—broader metrics that may dilute their significance and potentially reduce the chance of a enforcement action.

“Unless and until [the regulations] are changed, we can expect the OCC, FDIC, and FRB [Federal Reserve Board] to cite “fifth pillar” violations as violations of the “system of internal controls” pillar,” a senior compliance officer for a global lender wrote in an email to ACAMS moneylaundering.com.

Alternatively, CDD failures may be listed as separate violations in their own right.

“If you don’t adhere to the fifth pillar under Title 31, you’re not necessarily going to get a cease and desist,” said a former senior regulator. “By not calling it a fifth pillar, they take it out of the knee-jerk reaction.”

During a closed-door meeting between regulators and industry representatives in November, a government attorney said the OCC did not plan to enforce the CDD rule as a fifth pillar of compliance.

“I was a little stunned,” an attendee of the meeting said. “I personally followed up with our Fed [Federal Reserve] contact [who] informally told me that’s their perspective as well.”

But sources also emphasized that any technical discrepancies between Title 12 and Title 31 that persist after the rule takes effect most likely will have little, if any, practical impact on enforcement, even if CDD rule violations do not constitute pillar violations in and of themselves.

The OCC possibly delayed officially adding a new, fifth pillar to avoid a formal rulemaking process that could have fueled perceptions of increased regulatory burden, according to Daniel Stipano, a former OCC deputy chief counsel who left the agency in June 2016.

“I think it’s an optics issue,” Stipano, now an attorney at Buckley Sandler in Washington, D.C. said. “From an enforceability standpoint it adds nothing.”

Industry confusion may also be informed by a shortage of official guidance on how to comply with the CDD rule.

FinCEN plans to release a list of frequently asked questions before the rule takes effect in May, and the Federal Financial Institutions Examination Council, or FFIEC, is revising its examination manual to incorporate the new requirements.

But the finer points of the Bank Secrecy Act and the federal code of regulations often matter less than the unique approaches of individual examiners, a compliance officer for a regional lender on the East Coast said.

“If a bank has a significant failure in [implementing] the CDD rule, [then] I would expect examiners to come down however they see appropriate.”

An OCC spokesperson declined to comment, and a spokesperson for FinCEN did not respond to requests for comment by press time.